Why one trader is selling calls in Encana
Chris McKhann | firstname.lastname@example.org
ECA finished the week at $20.83, gaining 2.3 percent on the day after trading as high as $21.85 in the morning. Shares have been trading between $17 and $22 since September.
The total option volume in the name topped 11,000 contracts, twice its daily average. A trader sold 5,667 August 21 calls for the bid price of $1.25, according to optionMONSTER's systems. The previous open interest was 666, so this is a new position.
The calls may have been sold naked, which would have an initial bearish bias and expose the seller to unlimited risk if the stock continues to rise. They may also have been traded against long shares as a covered call position, which would take its maximum profit if shares are at or above the strike price but would not partake in any gains above that level. (See our Education section)